More must be done to cut college costs

The average Connecticut college graduate enters the real world with a debt of $27,816 and as many as half of them will have to take jobs that don't require the degree they've just bought and paid for.

The numbers were released last week by the Institute for College Access and Success, which reported the average debt nationwide is a slightly higher $29,400 with the highest debt being carried by students graduating from colleges in the East and Midwest.

This isn't just an issue for students and their families. Student debt has passed the $1.2 trillion mark, making it second only to mortgages as the highest form of debt in the United States or six percent of the $16.7 trillion national debt.

It would have been worse if Congress and the president hadn't prevented the interest rates on federally subsidized loans from going from 3.6 to 6.8 percent last summer. This only applies to loans made by the government; private loans are closer to seven percent.

But we are still feeling the impact of the credit card abuses that were common until passage of credit card reform legislation over the strident objections of banks and other lending institutions in 2009.

Prior to passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD), credit card companies customarily set up booths on campuses to sign up incoming freshmen and others for credit cards without regard for their income or ability to repay. The companies could change interest rates - on anyone, not only students - whenever they wanted and charge late fees even on payments that arrived after 5 p.m. on the date they were due.

All of these abuses were ended by passage of CARD and college students under 21 must now have parents or guardians cosign applications before they receive credit. The lending institutions cried the reforms would cripple them but they appear to have survived nicely.

But despite these wise reforms, student loan debt has continued to rise at a spectacular rate because the cost of a college education has also continued to rise faster than the cost of other goods and services even as family incomes have declined.

The total cost of the $27,000 debt the average Connecticut college graduate finds him or herself carrying along with a degree is closer to $39,000 and it will cost around $350 a month to begin paying it off. A payment this large delays the graduate's ability to make other major purchases, buy a home, start a family, open a small business or otherwise access capital and all of this has a serious impact on the nation's economy.

There is no shortage of suggested solutions. The first is, of course, for colleges to rein in their costs. Tuition increases of three to four per cent this year were among the smallest in many years but you don't need a degree to determine even a three percent annual increase adds up to 30 percent over a decade.

Colleges could also make a greater effort to inform students and families about sources of aid and counsel them toward making the most reasonable loans. Going to college is far from a stress-free experience and families need to know what their alternatives are.

Of more immediate relief to overly burdened recent graduates would be repayment schedules based on their ability to pay with lower monthly payments required in the debtor's lower income years. This would reduce defaults and allow the graduates to get started with their lives.